Cold temperatures, the conflict in the Middle East, and an unsuccessful liquefied natural gas tender pose significant risks to Argentine industries, potentially increasing costs and leaving them without natural gas as winter draws near. The situation arises from local legislation that prioritises households and small businesses over industrial users in the event of a gas shortage. Large utility companies may even suspend service to industries during periods of peak demand from other sectors. With this autumn experiencing temperatures below the seasonal average, there is a concern that this pattern may persist, potentially leading to demand from essential sectors exhausting the entire supply. The most unexpected problem, however, was the failure of the tender issued by the Argentine government last month. From an alternative that potentially promised greater efficiency and lower prices, the industrial sector suddenly found itself with the government once again in charge of supply — only at costs exponentially higher than those it had promised. Since 2004, the state-owned company Argentine Energy (in Spanish, Enarsa) has been tasked with overseeing the procurement and distribution of LNG, which serves as a substitute for natural gas during periods of heightened demand. This prevented the cost of imported petrol — which is significantly higher than that of domestic production — from affecting companies’ profitability and ultimately contributing to overall inflation.
The Milei administration, however, opted to terminate this scheme as part of the fiscal tightening measures it has been implementing since assuming office. The objective was to ensure that the private sector would absorb the costs, with Enarsa merely tasked with issuing a tender for a distributor to manage the operation. Last month, it was announced that the winner of that tender was the Spanish company Naturgy. The bid was priced at $4.51 per million BTU. This fee encompassed towing, maritime agency services, the utilisation of the terminal situated in Escobar, regasification — the procedure of transforming gas from liquid to gaseous state — and the employment of the gas pipeline extending to its linkage with the distribution system. However, the energy and mining coordination secretariat, which operates under the economy ministry, has cancelled the tender. The rationale behind this inquiry is multifaceted. A technical report estimated that the cost of the operation for the same amount of BTU would be around US$3.50. The situation prompted Enarsa to regain control over the sourcing of LNG to address the anticipated peak demand in June. There is, however, a key distinction from previous arrangements: imported petrol will now be marketed to the private sector, with Enarsa no longer incurring the expenses.
Last week, Enarsa communicated to companies aiming to secure energy supplies for the winter that, in June, the costs related to regasification and other services would amount to US$5.16. The amount reflects an increase of 47.4% compared to the prior figure. Not only that, it surpasses the private offer that the government declined, which was intended to remain in effect throughout the entire winter. Moreover, the price of liquefied gas has consistently increased since the onset of the conflict in the Middle East. From US$9 per million BTU at the beginning of the conflict, the number now sits at US$16. While the government has yet to offer an official rationale for the increased costs, Energy and Mining Coordination Secretary Daniel González has come to the administration’s defence, aiming to instill confidence within the sector. “We are going to ensure that when we cover the entire winter, the total cost will not be higher than what we would have had with the private sector,” he stated. The agricultural and industrial sectors responded promptly. The Argentine Oil Industry Chamber informed the energy ministry that “the cost of regasification is out of proportion with international benchmarks.” They requested “a technical explanation” regarding the determination of the figure, considering that it represents a “highly sensitive amount in a cost that is already very high for the sector to bear.”
Discontent has recently extended to producers in the Argentine Northwest, particularly within the sugar and lemon sectors. Tucumán Industrial Union Vice President Florencia Andreani informed that Naturgy’s regional distributor communicated that the government had reallocated available gas transport capacity, resulting in a shortage in the region. They suggested that companies that haven’t purchased gas do so urgently or consider another possible energy source’, she explained, adding that power outages could last up to ’90 consecutive and uninterrupted days’. Andreani stated that, via the Tucumán provincial government, they secured a “energy quota” from the state-owned oil company YPF, allowing them to acquire natural gas at under US$11, which is significantly lower than the previously discussed range of US$22 to US$24. Córdoba has experienced less favourable circumstances. According to the province’s industrial chamber, 130 companies have experienced impacts due to gas restrictions. Chamber President Luis Macario indicated that discussions with the government concerning this matter have not yielded any advancements.